Forecasting 101> Midterm essay

We've heard the term 'generational low(s)' in association with prescient calls twice in the past ten years. (a) The first was Cara's call to buy gold in the Fall of 2003. I lost my (platinum) wedding band around that time. The little guy (who has a knack for finding lost items!) eventually found it about a year later. In the meantime, I replaced it with a gold band, and we were shocked at how far gold prices had dropped- from a high of 380 earlier in the year to around 320 at time of replacement. Gold is now trading at 1780 (with Cara targeting 2500), so obviously a great call. And the gold band has turned into a great investment decision! (b) The second occurred in March 2009, when Kass declared the SPX/DJIA to have hit generational lows at 670/6700. (c) Kass went on to call another 'generational low' in bond yields when he decided to short bonds about a year ago. He tends to be early on his calls (his March '09 call notwithstanding). In this case, he also made the mistake of using TBT (a leveraged 2x inverse fund) to back his call. So he's taken a beating on that trade. I think he's right, however, from a long-term perspective. In 1981, 30-year Treasury bonds were yielding 14.68% risk-free! It's now 2012, and if you bought those bonds in 1981, you've had a pretty good thirty years! It's just a matter of time before the trade runs in reverse, and I would tend to avoid bond funds for the next few years. (d) When many of us retire several years from now, bond yields will hopefully be back around 8-9%, and we can all park our portfolios in Treasury bonds and forget about the stock market. (e) Right now, of course, we have little choice but to invest in stocks. Expectations for a correction in October are running pretty high. So it's unlikely prices pull back much, if at all. My forecast (all in fun) is that we correct 2-3% in October (I'm currently parked in cash hoping for another buying opportunity), followed by a spike up in November. The indexes (with seasonal winds at their backs) should continue higher in December and January. By February/March, everyone will be on board, and I foresee a -10% or greater drop into Spring '13. I'm not necessarily recommending any action based on the forecast- I'll be happy just being able to look back in six months without wincing too much!