My 12 bold predictions for 2012 (Part II)
This is Part II of my 12 bold predictions for 2012 (part I can be viewed here).
Before I start with the remaining 3 predictions, let me first say that I received hundreds and hundreds of e-mails in response to my Part I post.
Most of the e-mails came from people who wanted to sell me something (Viagra, cheap designer cloothes, etc.) or offer to meet single girls in Russia, but some of them also came from the people who really found my predictions for 2012 very valuable (or im their words: life-changing).
A good 20-30% of the e-mails came from novice investors who didn't really understand how they can double their profits by investing in both DOW and S&P500 at the same time (this comes from the secret I revelaed in my prediction# 2) . I'm not suprised about this at all as not everybody is an experienced investor as I am.
The novice investors' questions boiled pretty much down to this one question: "If DOW and S&P500 are closely correlated as you say (meaning, will have almost exact same return), then how can one double his/her profits by investing in both?"
Well, to be honest, my first reaction to this question was "What a stupid question?". Then, I reminded myself there are no stupid questions. (The only stupid questions are the ones that totally don't make any sense, like: "What's in your wallet?" or "Who will you call when the disaster strikes?").
So here is a simplified explanation of how one can double his/her profits by investing in both DOW and S&P 500 (even if I can help one thousand people be better investors, I'll be a happy man):
To keep it simple, let's assume you invested $100 in DOW (let's call this your initial investment).
When DOW goes 10% up in value, you made 10% or $10. Easy, right?
However, if you also invested $100 in S&P 500 at the same time when you invested $100 in DOW, you will also make $10 on your investment in S&P500 (being that from my prediction# 2 we know DOW and S&P 500 are closely correlated).
By doing this, your profit is now $20 instead of $10, meaning you doubled your 10% profit on your initial $100 investment (10% profit in DOW + 10% profit in S&P 500 = 20% profit).
Complicated, I know, but nobody said investing was easy. Many people (other than Wall Street's hedge fund managers and other shady Wall Street's cats) don't understand this principle and are then left wondering why they lose money in the market year over year.
Well, my friends, you need to have some levarage in this investing game, and your levarage is knowing me (or at least reading my predictions and related secrets).
Let's now continue with my 2012 predictions.
4. Motley Fool will fix their rec counting machine in 2012.
Why I think so? First, let me say that I know this is one of my riskiest predictions so far. If it was that easy, they would fix it by now, right?
(I'm sure you all know what problem I'm talking about: You see a post with 2 or 0 recs / recommendations, just to find out by opening the post, that it actually has 27 recs. Basically, something's wrong with TMF's rec counting machine.)
The problem seems huge, but I have an explanation for the root cause of the problem, which makes me very optimistic TMF engineering team will be able to fix this one in 2012.
Well, here is what I think happened. There is this one guy in TMF's engineering team (most likely the senior engineer) who was in charge of maintaining TMF's rec machine (both hardware and software part of it). Unfortunately for us (but fortunately for the guy), he went on a 3-4 week vacation during the Christmas/Hannukah and New Year holidays, and the rest of the TMF's engineering team doesn't know how the damn thing works (let alone how to fix it).
But here is the good news. Holidays are almost over, the senior engineer is soon going to be back, and I'm sure this little glitch in TMF's system will soon be fixed. In other words/ language: No mas problemas in 2012, mis amicos.
(p.s. If this guy has quit and is gone for good, we're screwed).
The remaining 2 predictions will be revealed tomorrow...
Happy New Year Everybody.