2011: Taken for a Ride

Written By Nick Hodge

Posted December 27, 2011

A lot happened this year.

The world ended – twice. Your Zodiac sign may have changed. Don Gorske of Super Size Me fame ate his 25,000th Big Mac.

Casey Anthony is not guilty?

The princess isn’t as cute as her sister.

And corporations are people, my friend.

But the year was much more complex and tumultuous than those water cooler events.

Given the multitude of high-impact occurrences, you should be grateful if you and your family made it through unscathed. It was a mere bonus to grow your portfolio.

End of an Era

The Dow opened the year at 11,577.

Since then, it’s been as high as 12,928 and as low as 10,362.

It’s up for the year, but volatility killed most investors’ profits.

The S&P 500 is down 1.4%. USA Today reports 92% of diversified U.S. mutual funds will turn in a loss, “and some of them are doozies.”

With that kind of muted performance and so much else going on around the world, most people will leave this year with lessons, not profits.

And since none of the major events of the year were forecasted or anticipated, I find it better to learn from them rather than shoot in the dark at next year’s predictions.

I think Pulitzer-winning hisorian David M. Kennedy has said it best:

What seems most compelling about so many of the events of 2011 is their uncanny similarity to the narrative that began to unspool in 1932, when the full shock of the Great Depression’s impact began to be fully absorbed. The implosion of over-stressed established regimes, the demonstrated obsolescence of vested ways of thinking, the emergence of new leaders, new ideas, new institutions, new ways of life — the ‘new normal’ in realm after realm around the world.

He suggests “the age of American global hegemony is almost certainly winding down,” and it:

Might mark the definitive end of the the post-World War II and post-Cold War eras, and prove the portal to a future in which there are many more powerful and ambitious players on the world stage, more bitter political contestation at home, and more uncertainty everywhere than at any time since the 1930s.

By that measure, 2012 is going to be very interesting.

End of the World, Again

Not only was the world supposed to end twice this year, in May and October per that nutjob Harold Camping… it’s also supposed to end next year.

If the Mayans are correct, December 21st will be your last day here.

Of course, they aren’t and it won’t.

But if this year was the year of drastic events, I think next year will be the year of drastic transformation.

Think about what Kennedy said above. Regimes are collapsing, conventional ways of thinking are changing.

Mubarek’s out. Berlusconi’s out. Osama’s out. Qaddafi’s out. Kim Jong is out. U.S. troops in Iraq are out. Our AAA credit rating is out.

The rest of the Middle East is on the brink. So is the 18-year-old Eurozone.

Unrest abounds, and though they haven’t quite put their collective finger on it yet, the masses know there’s something wrong with the current “system,” and the Age of Information is allowing them to do something about it.

Citizens of North Africa and the Middle East realized their way of life was a sham.

Similarly, citizens of the Western world are awakening to the shams in their own lives: reporting by hacking, rampant corporatism and egregious lobbying, faux social conservatism, the revolving door between banking and government institutions, and the emptiness of fiat currency.

No, the world won’t end in 2012.

But the world as you know it might.

Global Shift

I didn’t realize until this weekend, but I’m anticipating a shift in global thinking and, therefore, in global markets.

Looking at all my accounts over the holiday, I noticed I’m only 25% invested. And 98% of that is in my individual retirement account.

Nearly 75% of my liquid assets are sitting in cash.

Almost subconsciously, this year’s volatility has put me on the sidelines. I made a few trades I had a strong hunch on, but I’ve mostly migrated out of the market.

The only stock I currently own is Transocean (NYSE: RIG), for the nearly 8% dividend.


Because, like I said, I think next year will be a year of drastic transformation. Of political awakening. Of balance sheet resetting. Of a return to real value over hyped illusions.

And I want to be in a position to drive when it happens, not be taken for a ride.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.

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