A New Year

2012 is over and like most years there was good and bad to it. Domestic equity prices clearly had a good year and the US political system had a lousy year. The economy is not dead but it is nowhere near where it should be coming out of a trough and probably not where the Fed thought it would be when the first set rates to zero.

My thoughts for 2012 were that the market would start the year with a big rally (mostly right on that one), there would be a correction such that most of the gain was given back (this occurred in April and May) and that the year would finish up a little (wrong about this point). Whether 2012 was up a lot is open to debate but up a little was definitely wrong. I've gotten pretty close with this sort of thing several times since I started the blog but not 2012.

For 2013 I think there is a high probability of the economic and stock market cycles ending. From the  bottom up we certainly could continue to muddle economically and stocks continue to do well but the cycles now are old. Bespoke cites the current bull market as the ninth longest out of what is counts as 26 bull markets since 1927. Of course my base case for the cycles ending in 2013 could be wrong which would be a good thing but it is always worth pointing out that all expansions and bull markets end, it is normal and will happen again. This is not cause for an emotion response but more of a tactical response when the time comes regardless of whether anyone's predicted timeline is correct or not.

On a personal level 2012 was a good year professionally, personally, for the Fire Department and for United Animal Friends (the rescue my wife volunteers with). As a glass half full person I am likely to always think a year went well but two people very close to us got very sick this year.

In terms of looking back on a year, so it makes sense to look forward to the next year. Part of this process can be a self assessment related to saving and investing; a sort of check up.

This takes me to an article at Seeking Alpha by a blogger who goes by the anonymous handle of Regarded Solutions. He and I don't often draw similar conclusions but the linked post was effective in conveying two points that I try to touch on here. One was about how saving money works in your favor in terms of compounding and this article also sought to get readers to think about how much they really need in retirement. This is all about asking yourself the right questions and sorting out what you find important.

The significance here is that when you figure out what is actually important you will be able to devise a more suitable financial plan and investment policy (pertains whether you hire someone or do it yourself). For example maybe when you were 25 you thought you were Ferrari guy (or aspired to be one) and then maybe at some point down the road you realized a Ferrari (the picture is of a Ferrari believe it or not) is not what you need.

I'll invoke a quote from our friend Bill here in Walker that I have shared many times before; you can figure it out now or you can figure it out later but if you can figure it out now you'll be much happier. That works on many levels.

While everyone's priorities are different, the Woody Allen quote applies; there is no situation where having more money made it worse. So in that light, may you save more money, live below your means and have a happy, safe and healthy New Year.