Price targets: say good bye to the mass hypnosis!
In 2010 I stopped giving explicit price targets (with few exceptions) for 3 main reasons:
- I have been active in the markets since 1990 and every year it's getting clearer that the focus on price targets is not just redundant but actually very detrimental because it leads to the destruction of profits. Instead of just smiling at the usual price targets hokum I now actively fight against it.
- In the Amanita approach prices have always been pretty meaningless: not important, inaccurate, not reliable. Yet over the years I have observed that subscribers were still paying way too much attention to price targets spite of the mantra-like repeated disclaimer that timing is everything & price targets nothing.
- The beginning of wave 5 of 5 of the hyperinflation in the summer of 2010 was an additional trigger. With the outbreak of a hyperinflation in the narrow sense of the word ('adding zeros') the implicit price targets of the forecast charts become redundant & misleading, too, so that they are discontinued.
7 fundamental points on prices, ranking according to their importance:
- trend up or down: This is by far the most important price forecast that one can easily dash against. The investor is primarily watching inflation-adjusted trends, the trader is focusing on nominal trends.
- intermarket price trends: This is very important for the investor (to a lesser extent for the trader) but hardly acknowledged by the crowd. E.g. an asset class rising by, say, +10% a year is great when everything else loses -20% - but a very bad performance when everything else is rising +30%. Stock picking also falls under this category, i.e. the relative strength of a stock compared to the overall market or the sector. For a decade my forecast has been right that the inflation markets (= commodities, especially precious metals) are the best asset class. E.g. the nominal performance of the S&P 500 is a meager +20% since 2003 while gold & silver have soared by 300-400% the past 7 years. Even the best market timers could hardly beat buy-and-hold in the stock market by so much to reach the buy-and-hold performance of the metals.
- intramarket price trends: This is of remote importance for the trader & investor and still rather easy to predict, like the key lows & highs mentioned in the Amanita Investor's Guide (e.g. that gold & stocks would start the biggest correction 2010 in the 2nd quarter). This type of forecast is needed to find entry & exit points for investing (and perhaps also hedging).
- price reaction to inputs (constellations, cycles, indicators): At times such an analysis is quite revealing & interesting. E.g. in the summer of 2010 everything was pointing down, yet the financial markets only saw moderate declines. From September 2010 on this relative strength was correctly interpreted as a super-bullish omen for the near future.
- illuminati price targets: Previously, only long-term trend reversals were encoded with specific numbers, e.g. in the S&P 500 t he bear market low at 777 points on 10/9/02 or the bear market low 666 on 3/9/09. However, unnoticed by 99.9% of the market participants this pattern changed in 2010, that's why meanwhile many reversals are encoded with the favorite numbers of the reptiles (elites, illuminati). At times this allows interesting insights into future trends...
- illuminati fake prints: At times you see weird outliers in live charts which is more than strange because with software plausibility routines these fake prints could be avoided easily. Experience tells us that quite often these fake prints are secret hints about the coming trend, partly even stating rough price targets. 3 examples:
(a) An extreme fake print were the 77,777 OEX puts in early May 2006 at 3 minutes before 1 p.m. = 13 o'clock a few days ahead of the biggest correction of the year 2006...
(b) EUR/USD had a bearish bad print in late November 2007. The price topped out more or less to the day, the top held for 3 months.
(c) On the day before the 5/6/10 flash crash the SP 'accidentally' had a bad print down to 1056 (5+6 both on the price axis, with 5+6=11), the level it crash the next day...
- precise price targets: Price targets are the fetish of the crowd, as usually the crowd is obsessed by the wrong perspective and overlooks what really matters. I have been active in the financial markets for more than 20 years and have yet to find a forecaster who has been successful over the long haul with precise & reliable targets. Some calls are dead on & the next ones are light years off... Others with a ‘shotgun approach' are changing their targets every day, so that they can finally claim that their targets were reached. Price targets not only pretty futile for a good performance, in contrast they are even a portfolio destroyer. A strict price orientation leads you to believe in something that doesn't work in reality and thus creates an artificial feeling of safety leading to taking a wrong position. Without doubt, a good long-term performance is always the result of working with probabilities and not against it, yet the focus on concrete price targets means to work against the probabilities. My suggestion: say good bye to the mass hypnosis around price targets - your portfolio will be thankful! :-)