Year 2010 was a rather good year for me in terms of networth growth (nearly doubled). It was a year where I was super busy, but monetary and spiritually rewarding. Why I said it is spiritually rewarding is because I believe it is my calling now to assist and help students do well in their studies, through active teaching and through books.
Year 2011 and beyond is indeed more exciting than ever before. This post is not going to be about any new year resolutions, because I have already set myself in place with Goal 2013.
Apart from Goal 2013, this is my view of the economy and market in concise form:
1) Asset prices continue to rise.
2) Markets continue to rally.
3) Precious metals and commodities may continue uptrend.
4) While I believe it will rally, eventually, there will be a very very great crash. Just when. My estimate is 2018 based on a ten-year cycle.
The first reason is the apparent bearishness of many in the market. To me, a bullish/bearish appearance in stock prices does not indicate a bullish/bearish emotion of investors in the market nowadays. The main reason is because of institutions and liquidity, as explained in the second and third reasons below. Yet, many bullish/bearish indicators are usually dependent on price movements. Is that really accurate when currencies are depreciating at such a fast rate? IMHO, there are a huge number out there with bearish views of the market. Not based on prices, but based on observations and my interactions with people, and by putting myself in their shoes. To me, many have been "financially awakened", have read many financial blogs and financial books, and hence are more aware and cautious of playing the market unlike before. The recent bear is still fresh, and naturally, fears will linger about an impending top. I try to be contrarian and call for another mega rally with a time frame of 6 years.
The second reason is because of the presence of high liquidity in a world that is more financially awakened than before. Is it not scarier than before that more and more people, especially the younger ones (like me), are talking about the concepts of financial freedom? While there are indeed still people who do not bother, I believe there's a rise in the numbers who do bother. Hence, I believe more and more people will buy more and more assets (including paper assets like stocks), leading to a buying fervour that will grow and grow.
The third reason is that with printing of currencies by so many countries, the value of currencies are dropping. So what if a government owes lots of debts; when desperate, one only need to "print" more cash to return the creditors. Furthermore, quantitative easing provides even more low interest cash to institutions to borrow and buy assets worldwide. Who cares about currencies and debts anymore. It's a never ending cycle:
use spare cash buy assets <==> borrow cash to improve liquidity and position for more purchases
And how to get the extra cash to lend? Just print more. Eventually, printing of currencies can help buy up more and more assets till currency gets worthless. Quite a gloomy eventual outlook on currencies, but a mega bullish outlook on asset prices.
But eventually, all good things must come to an end. All parties must end. Will the world greatest economy allow their reserve currency status be removed? I don't think so. That will be the time when these borrowers sell everything at a large profit and return the cash, solving the problem of debt of the country. A conspiracy theory I believe in. When it will end is up to anyone's guess.
The stock market is like a sheep farm. The institutions borrows the cash to feed to the sheeps in these sheep farm, and slowly fatten them up over a period of time. We see this as a bull market, where everyone is buying. Everyone is earning money and everyone is happy.
When the sheeps are ripe for harvest, it's time for the slaughter to lock in the profits. Institutions will start a mega selldown to lock in their profits. TA practitioners will see supports being broken, and start selling at the same time, further fuelling the selldowns. This is what we see as a bear market.
Eventually, most of the sheeps are all slaughtered. It's time to grow and fatten a new batch of sheeps. This is what we see as market recovery. And yet with all these financial manipulations, no value is created. I'm just a small sheep in this farm, but I believe the fattening process will continue, and hence I'm staying vested.
This is why my growth strategy for 2011 and beyond, apart from remaining vested in the market, includes growing my own asset, which is a business, one which aims to value create instead of competing. One which aims to assist instead of destroy. And for myself, I have identified to be in the business of creating educational materials to help students score. This, would be my main thrust and growth strategy through year 2011.