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Dow hits 6,000 - Happy on the way up, sad on the way down.
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Last year in this space, we posted a list of predictions for the coming year with the promise to review them at year end. This is the fulfillment of that promise - a recap of last year's predictions, with a look ahead to the coming year.
Predictions 2002: Recap
SEATTLE - 26 December 2002
Fall Forward
Chart Courtesy Elliot Wave International
"Whenever you find that you are on the side of the majority, it is time to reform."
- Mark Twain


Another terrible year for the stock market is winding down to close. Terrible, of course, is a relative term. To the sophisticated investor, the direction of the market matters little - opportunity is always abundant, if not on the long side, then on the short; if not in U.S. markets, then elsewhere in the world; if not in paper assets, then in physical assets.

By our calculations, we did not do badly with our predictions. Of ten predictions, we credit ourselves with getting seven correct. Our ratio would have been 80% had the Dow fallen a mere 177 points further at its October low. But it is not important to be right all of the time, it is a matter of what you do with the information that you have and how you play the game. Even the best baseball players fail 70% of the time.

Following are the predictions we made last year in bold, followed by our score and brief commentary. To see the original, unaltered predictions, click here.

1. America's War on Terrorism will expand to include other countries as targets.
Score: 1 / 1
Bingo. As we predicted, Iraq has become the next target.

2. There will be another major terrorist attack on the Western World.
Score: / 1
Thankfully, there was no attack in the United States, though there were rumblings elsewhere in the world. The Bali attack was the largest attack against westerners so far.

3. No economic recovery for the U.S. or the world in 2002.
Score: / 1
By the official numbers - GDP growth - we got this completely wrong. U.S. and world economies grew, officially. But 2002 was a year that saw plunging stock markets, rising unemployment, and a general malaise of uncertainty and negativity settle over the country and the world. We give ourselves half a point since the average man finds himself worse off at the end of this year than at the beginning, in spite of the "recovery."

4. Major domestic blue chip averages will hit fresh, multi-year lows.
Score: 1 / 1
All major domestic blue chip averages, including the NASDAQ hit four year lows.

5. Minimum downside target for the DJIA: 7000
Score: 0 / 1
Close, very close, but no cigar. The Dow got as close as 7177 - about 2.5% away.

6. Minimum downside target for SPX: 850
Score: 1 / 1
The actual SPX low was 768.

7. Both the Euro and gold will appreciate significantly (15% +) against the dollar.
Score: 2 / 2
The Euro is up over 18%, and now sits above par with the U.S. dollar. Gold, likewise easily busted through $300 and enjoyed a 23% gain for the year.

8. Inflation will return to the U.S. Economy in 2002.
Score: 0 / 1
Got this wrong - it appears we'll have an extended period of deflation before the inflation kicks in, possibly years down the road.

9. U.S. Housing prices will fall in 2002.
Score: 1 / 1
Prices of homes worth $1,000,000 or more - a leading indicator of the housing sector have fallen by as much as half. The price increase of all single family homes sagged to under 1% in the 3rd quarter, and prices actually fell in seven states and 33 metro areas. (Martin Weiss' Safe Money Report)

M.A. Nystrom
Other links of interest:
2003 Outlook and Predictions
Predictions 2002
Predictions 2002 Recap

News Links & Recent Articles:
This Week

Sources & other interesting reading material:
Bibliography



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